Bush's Tax Cut Needs Front-loading

The Hill

March 21, 2001

The recent rhetorical antics of the White House and its critics over the question of whether the economy is or is not in recession came to an end last week as Democrats began blaming President George W. Bush for the downturn. That it began before the man took office hardly matters as more and more Americans begin to believe that the good times are coming to an end.

What does matter is fixing blame and positioning oneself and one's party to take credit for the recovery when it appears. Bush's problem is that presidents are generally assigned ownership of recessions that take place on their watch regardless of where or how they began. They always try, correctly or incorrectly, to place the blame elsewhere, but in the real world they have to accept the blame and deal with it.

The good news from Bush's perspective may be that the same factors that weakened his predecessor's ability to claim credit for the boom times that are quickly receding into the mists may ameliorate the blame assigned him for the bad times that seem to be coming around the corner. The American people no longer believe as they did not many decades ago that government creates their jobs, runs the economy and is responsible for every blip in the Dow. Indeed, to a greater extent than at any time in the last 75 years, they seem to share Ronald Reagan's view that the most important thing government can do to foster prosperity is get out of the way.

If this view survives the crumbling of the new economy, it will make Bush's task somewhat easier both because he won't have to shoulder all the blame for what's going on and because his administration is likely to advance "solutions" to the problem consistent with it.

Which, of course, brings us to the Bush tax cut. It is a tribute to George W. Bush that he is fighting to enact the proposal he made during his campaign for the White House. Too few elected officials even remember what they said during their campaigns. That he not only remembers, but is doggedly fighting to deliver on the promises that got him to where he is today is admirable.

The problem is that his tax program was put together before the economy began to slip. As a result, it wasn't designed as a stimulus package. Instead, it was constructed to pass muster in a skeptical Congress and was both smaller and less stimulative than it might have been had it been put together last week rather than last year.

It represented a good start and won conservative support both because it demonstrated that George W. Bush is a Reaganite tax-cutter at heart and because most felt it could either be grown in Congress or that additional cuts could be enacted down the road. On its face, however, it was both smaller and less potentially stimulative in the short run than either the Kennedy or Reagan rate cuts.

The problem is that if the Bush package as presently designed is enacted, his victory could prove Pyrrhic rather than real. This is because it provides little in the way of meaningful relief in the short run and isn't likely to do much to jump-start a sputtering economy. To do that, the White House should increase the rate cut and have it kick in retroactively while throwing support behind proposals to significantly slash or eliminate the capital gains tax.

Otherwise, the Democrats will be able to continue to play the class warfare game more effectively while giving Bush clear title to the recession. They will be able to say, on the one hand, that they let Bush do what he wanted, but that it didn't work. Then, they'll be able to ask working Americans if they have seen any real results of the Bush tax cut in their take-home pay. Most won't have, of course, because much of the benefit won't appear for several years.

If the tax cut doesn't do much for the economy and isn't showing up in the form of more take-home pay, they'll suggest, it must have gone precisely where they predicted it would go—to the rich.

Now it is possible that this scenario won't develop. Those economists who are even today suggesting that the economy will right itself quickly could be right. If they are, Bush will have little to worry about.If they're wrong though, he'd be well-advised to accept the suggestions now coming from some Democrats as well as a lot of Republicans that his rate cuts be front-loaded and increased. If he does this and moves quickly he can fulfill his campaign pledge and take title not to a recession, but to an economic recovery.

David Keene is the chairman of the American Conservative Union and a managing associate with the Carmen Group, a Washington, D.C.-based governmental-affairs firm.